标题: Expected Return and Pensions [打印本页] 作者: parott 时间: 2011-7-13 16:02 标题: Expected Return and Pensions
I see the question does increase/decrease in expected return to do Pension accoutning as far as PBO? Funded Status? and Pension Expense?
As far as I know it only changes pension expense becuase the actuarial gain/loss cancels out the change in PBO... Is this correct?作者: ayaz_mahmud369 时间: 2011-7-13 16:02
changes in Expected return would affect your "Fair plan assets" so anything that has a component of Fair plan assets would get affected.
So your
Funded status,
Economic Expense
Periodic Cost
would all be affected.作者: Otabek 时间: 2011-7-13 16:02
It only affects your pension expense. Nothing else.作者: smuggycfa 时间: 2011-7-13 16:02
pepp,
You trying to bring all of us down with you?...作者: BelalM 时间: 2011-7-13 16:02
"I see the question does increase/decrease in expected return to do Pension accoutning as far as PBO? Funded Status? and Pension Expense?"
PBO is the liability so the expected return of the asset won't affect it.
funded status is FV plan assets - PBO and the fair value of plan assets are affected by ACTUAL returns, not expected returns.作者: SFoyil 时间: 2011-7-13 16:03
Ok. i am on record for saying, I hate FRA.
I still think it affects your funded status under (US GAAP).
US GAAP FUNDED STATUS = DBO - Fair value of plan assets.
I still think it affects your Period Cost
Period Cost = Srv cost + past service cost + int cost +- actuairal gain/loss - expected returns
I still think it affects your economic expense (indirectly though)
Economic expense = Company Contributions - Net Funded position at End + Net funded Position at the Begin
Economic expense = Change in DBO - Change in plan assets - Company contributions
tozert, i am already down in the gutter but I am looking at the stars.作者: economicz 时间: 2011-7-13 16:03
paulblart is on the money. Expected Return is a smoothing mechanism....we use expected return in the reported pension expense in order to smooth our expense & earnings to reduce the volatility.作者: flyinggirl 时间: 2011-7-13 16:03
^ This. Andrew's got it. Another relevant point is that GAAP doesn't allow income smoothing.
So another question, would this mean the pension expense reported under GAAP will have an adjustment to reflect the actual returns on plan assets? If so the following should be true...
- if returns on plan assets are GREATER than expected, GAAP pens exp < IFRS pens exp
- if returns on plan assets are LESS than expected, GAAP pens exp > IFRS pens exp
any ideas?
Edited 1 time(s). Last edit at Wednesday, June 1, 2011 at 03:03PM by magicskyfairy.作者: lucasg85 时间: 2011-7-13 16:03
US GAAP reports net funded status, net pension assets/liabilities; IFRS reports gross amount. The impact will be more on mixed ratios (ROE, ROA), rather than economic or reported expenses. Expenses are computed in the same manner under GAAP and IFRS. Right?作者: redskins44 时间: 2011-7-13 16:03
I think I catch your drift.....but I'm not sure and don't think the material goes that deep作者: firat 时间: 2011-7-13 16:03
magic i don't think yours makes sense....the actual return does not impact the reported pension expense作者: ninja1024 时间: 2011-7-13 16:03
I dunno, the mock seemed to go about that deep. for example, they had that question about how to show an adjustment on the CF statement for pension expense, and I had no idea. I know now:
adjustment to NI under CFO = (pension expense - employer contributions)
but I had no idea until I saw the solutions.作者: wizofoz 时间: 2011-7-13 16:03
Magic, I remember reading somewhere saying if economic expense > contribution, it is like borrowing money so you need to move (economic expense-contribution)*(1-t) from CFO to CFF. Company treats reported pension expense as CFO. Not sure if this makes sense.
Edited 1 time(s). Last edit at Wednesday, June 1, 2011 at 03:44PM by madamesoleil.作者: RepoToronto 时间: 2011-7-13 16:03
Its not somewhere, its in Pension accounting adjustments to Cash flow section. lol.作者: Swanand 时间: 2011-7-13 16:03
^ wow, wtf is that... screw this section, right in its face作者: YAhmed 时间: 2011-7-13 16:03
you need to add (1-t) to this correct?
adjustment to NI under CFO = (pension expense - employer contributions)*(1-t)
because you are reducing a interest-based liability作者: random_walker47 时间: 2011-7-13 16:03
not sure, they didn't seem to do that in the mock, so I'm gonna go with no; not because I disagree with you on some fundamentals, just cuz monkey see monkey do
Edited 1 time(s). Last edit at Wednesday, June 1, 2011 at 09:15PM by magicskyfairy.作者: Rasec 时间: 2011-7-13 16:03
if the company had employer contributions above economic pension expense if would have been like it paid off a loan, so you would add it back to CFO and subtract it from CFF (as it you were paying off principal on a loan.)
if the company's contributions were less than the expense, they didn't pay contribute enough and CFO should be brought down. Since they didn't pay enough, they essentially used pension accounting to borrow money, so CFF should be adjusted downward for the difference.作者: kkn006 时间: 2011-7-13 16:03
i dunno brah, look at 2011 mock afternoon session, Q36; they didn't screw around with the taxes
Edited 1 time(s). Last edit at Wednesday, June 1, 2011 at 09:33PM by magicskyfairy.作者: DSquaredSlim 时间: 2011-7-13 16:03
apologies, the question specifies to ignore income taxes... so there it is作者: chaojimali 时间: 2011-7-13 16:03
Wouldn't base "depth" on one mock or another. Anything's game. Base it on LOS. You can only test so much per mock.
